What Happened?

A number of stocks traded in opposite directions in the afternoon session after the August Producer Price Index rose 5.4% year-over-year and crude oil climbed past $100 per barrel, fueling renewed fears of stubborn inflation and extended borrowing costs. According to the U.S. Bureau of Labor Statistics, the Producer Price Index for final demand increased 0.4% month-over-month in August, driven largely by rising energy and diesel fuel costs. The 5.4% annual increase topped forecasts, underscoring persistent wholesale cost pressures that threaten to spill over into consumer prices. Compounding the issue, Bloomberg reported that Brent crude oil pushed past the critical $100-per-barrel threshold for the first time since July, raising operating and transportation expenses across multiple industries. For the retail sector, this creates a dual headwind: higher logistics costs compress gross margins, while higher prices at the pump squeeze household discretionary spending. Investors are increasingly concerned that this resilient inflation will push central banks to keep interest rates elevated for longer, increasing capital costs and dampening corporate profitability across the broader economy.

The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks.

Among others, the following stocks were impacted:

• Apparel Retailer company Urban Outfitters (NASDAQ: URBN) fell 3.4%. Is now the time to buy Urban Outfitters? Access our full analysis report here, it’s free.
• Apparel Retailer company Tilly's (NYSE: TLYS) jumped 4.7%. Is now the time to buy Tilly's? Access our full analysis report here, it’s free.
• Department Store company Kohl's (NYSE: KSS) fell 4.3%. Is now the time to buy Kohl's? Access our full analysis report here, it’s free.

Zooming In On Tilly's (TLYS)

Tilly’s shares are extremely volatile and have had 50 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.

The previous big move we wrote about was 7 days ago when the stock gained 9.6% on the news that the company reported second-quarter 2026 financial results that beat Wall Street expectations, highlighted by double-digit comparable store sales growth and strong forward guidance. According to a company press release, Tilly's generated revenue of $163.5 million, up 8.1% year on year, and GAAP earnings of $0.27 per share, while same-store sales grew 12.1%. These results comfortably beat analyst estimates, which had projected revenue of $157 million and earnings per share of $0.17. The retailer also delivered better-than-expected guidance for the third quarter of 2026. Management projected midpoint revenue of $152.5 million and midpoint earnings of $0.10 per share, well ahead of Wall Street consensus forecasts. Furthermore, operating margin expanded to 5% from 1.8% in the prior-year period. Investors welcomed the combination of accelerating sales momentum and expanding profitability.

Tilly's is up 110% since the beginning of the year, but at $4.25 per share, it is still trading 22% below its 52-week high of $5.45 from June 2026. Despite the year-to-date gain, investors who bought $1,000 worth of Tilly’s shares 5 years ago would now be looking at only $294.93.

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